Emerging market volatility inched downwards as the iShares MSCI Emerging Markets ETF (EEM – 39.83) rose 1.4% and the iShares MSCI Brazil Capped ETF (EWZ – 44.66) was up a little over 2%. Despite putting up solid numbers this week EEM is down 12% and EWZ is down just over 20% on the year. VXEEM is also at just below five points higher than VXEWZ as the Brazilian economy is under pressure due to a host of factors. In addition periodic protesting pops up in the country that will be hosting the 2014 World Cup and 2016 Summer Olympics.
VXEEM dropped almost 14% on the week and the front month August contract was down almost 12%. The shape of the curve changed and is back to the traditional expected contango. As Brazil has a few more issues converting bears into bulls VXEWZ was only down 9.65% on the week. The curve is starting to reshape itself to a more normal environment but it isn’t quite there yet.